STUDY GUIDE F/MICROECONOMICS
21st Edition
ISBN: 9781307066920
Author: McConnell
Publisher: MCG/CREATE
expand_more
expand_more
format_list_bulleted
Question
Chapter 23, Problem 2RQ
To determine
Whether the statements about the human skills and wages are true or false.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose that an additional year of schooling raised wages by 7 percent in 1970, regardless of the worker’s race or ethnicity. Suppose also that the wage differential between the average white and the average Hispanic was 36 percent. Finally, assume education is the only factor that affects productivity, and the average white worker had 12 years of schooling in 1970, while the average Hispanic worker had 9 years. By 1980, the average white worker had 13 years of education, while the average Hispanic worker had 11 years. A year of schooling still increased earnings by 7 percent, regardless of the worker’s ethnic background, and the wage differential between the average white worker and the average Hispanic worker fell to 24 percent. Was there a decrease in wage discrimination during the decade? Was there a decrease in the share of the wage differential between whites and Hispanics that can be attributed to discrimination?
Assume that the productivity of farm labour depends on daily caloric intake, similarly to that depicted in Figure17.4. Using this kind of diagram, compare the efficiency wages that would apply to the following two types of workers:
• A landless labourer
• A labourer with small plot of land on which he
grows staple crops
Describe the likely equilibrium unemployment rates and wage rates for landless labourers and small landholders. Judging partially on the basis of this example, what sorts of data and what empirical strategies might you use to see whether nutritional efficiency wages were an important element in the rural labour markets of poor, rural economies?
A5.
Suppose that the initial rural distribution of income is (1, 2, 3, 4) while the initial urban distribution is (3, 4). The poverty line is 2, so the overall poverty rate (headcount index) is 1/3. Now imagine that all of the rural poor move to urban areas and each of them gains 20% in real income. Verify that the overall poverty rate falls to 1/6, yet the urban poverty rate rises from zero to 1/4.
Chapter 23 Solutions
STUDY GUIDE F/MICROECONOMICS
Knowledge Booster
Similar questions
- Questions: what are some of the dimensions of economic inequality and what is considered income? As in the case of income distribution, calculation of wealth distribution is done by different entities using different measurements, resulting in a disparity in outcomes. In fact, commonly, wealthis narrowly defined as financial wealth—namely, cash on handand the money value of tangible and nonliquid assets. Even justthe market valuation of financial portfolios is commonly used todefine financial wealth. However, some may extend the definitionto include the value of income streams and insurance rights that,for the most part, cannot be transacted or encumbered. Theseinclude Medicare, Medicaid, and Social Security. When suchtransfers and public assistance are included, the poor and manyelderly could benefit, reducing the wealth disparity (Galbraith2016). To obtain net wealth, the value of the debts are subtractedsubtracted from the value of the assets. Galbraith stated thatfinancial wealth…arrow_forwardSuppose a worker’s skill is captured by his efficiency units of labor. The distribution of efficiency units in the population is such that worker 1 has one efficiency unit, worker 2 has two efficiency units, and so on. There are 100 workers in the population. In deciding whether to migrate to the United States, these workers compare their weekly earnings at home ( w0) with their potential earnings in the United States (w1).The wage-skills relationship in each of the two countries is given byw0 = 700 + 0.5sandw1 = 670 + swhere s is the number of efficiency units the worker possesses.a. Assume there are no migration costs. What is the average number of efficiency units among immigrants? Is the immigrant flow positively or negatively selected?b. Suppose it costs $10 to migrate to the United States. What is the average number of efficiency units among immigrants? Is the immigrant flow positively or negatively selected?arrow_forward1. The absolute value of the slope of the consumption-leisure budget line is the after-tax wage, W. Suppose some workers (L1) earn W for up to 40 hours of work each week, and then earn 2W for any hours worked thereafter (called overtime). Other workers (L2) earn W for up to 40 hours of work each week, and then only earn 0.5W thereafter as working more than 40 hours requires getting a second job which pays an hourly wage less than their primary job. Both types of workers experience a “kink” in their consumption-leisure budget line. A. Refer to graph. Which one of the statements below describes the consumption-leisure budget line for L1 and L2 a. L2 budget line is CBT-40 b. L2 budget line is ABT c. L1 budget line is CBT d. L1 budget line is ABT B. Refer to graph. Which type of worker is likely to work up to the point of the kink? a. L1 b. L2 C. Refer yo graph. Which type of worker is likely to choose a consumption-leisure bundle far away from the kink a. L1 b. L2arrow_forward
- 20.7 Essay: How Economic Inequality Arises 1) What is "human capital" and why is it considered an investment? 2) What is "human capital"? How is it important in the determination of a worker's wage rate? 3) How is human capital acquired? 4) How does the demand for high-skilled workers compare to the demand for low-skilled workers? Why does this difference exist? 5) How does an increase in the cost to acquire a skill affect the vertical distance between the supply curves of high-skilled and low-skilled workers?arrow_forward(7) What labour strategies or employment policies are needed to promote greater gender equity? (8) What kinds of social programming or services might make a difference in promoting greater gender eguity?arrow_forward2) Choose the economic indicators below that do not cause higher income inequality but do correlate with higher income inequality; they may be caused by it. Options indicate how the indicator changes when income inequality increases. - GDP growth rate falls - Economic mobility rises - Educational access falls (not the same thing as "education") - Educational access rises (not the same thing as "education") - Access to health care falls - Rate of homeownership rises - Rate of homeownership falls - Economic mobility falls - Access to health care rises - GDP growth rate rises - All of the above - None of the abovearrow_forward
- Suppose that education does not affect worker’s productivity, but it is more costly for low-ability workers to obtain the education. If firms cannot distinguish between different workers they must pay them all the wage equal to the expected productivity. If they can distinguish between workers with different abilities, they pay each worker their marginal product of labour and make zero profits. 70% of workers in the population have low ability. The productivity of low-ability workers is YL = 20000, and the productivity of high-ability workers is YH = 50000. The cost of education to high-ability workers is CH(S) = S 4 , and the cost of education to low-ability workers is CL = S. 1. Suppose firms cannot observe worker’s education. What wage will they offer to a highability worker? What is the optimal level of schooling for the high-ability worker? Why? 2. Suppose that firms can observe worker’s educational attainment and believe that workers with the level of schooling above some…arrow_forwardSuppose that education does not affect worker’s productivity, but it is more costly for low-ability workers to obtain the education. If firms cannot distinguish between different workers they must pay them all the wage equal to the expected productivity. If they can distinguish between workers with different abilities, they pay each worker their marginal product of labour and make zero profits. 70% of workers in the population have low ability. The productivity of low-ability workers is YL = 20000, and the productivity of high-ability workers is YH = 50000. The cost of education to high-ability workers is CH(S) = S 4 , and the cost of education to low-ability workers is CL = S. (Answer 4.5.6 only) 1. Suppose firms cannot observe worker’s education. What wage will they offer to a highability worker? What is the optimal level of schooling for the high-ability worker? Why? 2. Suppose that firms can observe worker’s educational attainment and believe that workers with the level of…arrow_forwardTable 9P - 2 uses data for the year 2016 , adjusted to be comparable to each other . All population values are in thousands . a . Fill in the bîanks in the table . [LO 9.1 ] b . In part a, you should have found that the unem ployment rates of the three countries differ significantly from one another . Suggest three possible reasons to explain why the countries might have different unemploym country working-age population labor force employed unemployed unemployment rate (%) labor-force participation rate (%) japan 110849 64460 2160 france 31164 3520 56.1 germany 76066 46096 5.7 ent rates .arrow_forward
- How do social scientists measure income segregation? Racial segregation? Explain how researchers explore the extent to which racial segregation is the product of income segregation. What are the major findings of this work? What factors other than income differences contribute to racial segregation? Discuss.arrow_forward5. Suppose that John could work 365 days per year and could earn $200 per day for each day he worked. a. Draw his budget line with respect to his labor-leisure tradeoff b. Suppose that John chooses to work 200 days per year. Draw the appropriate indifference curve, and not his equilibrium wage income and labor-leisure choices c. Suppose that John’s wage rises to $210 per day. Show how his equilibrium level of income and labor-leisure will change. d. Suppose John is ill ten days per year. Draw the impact of this illness on the equilibrium above. How will it change his equilibrium allocation of earnings and labor vs. leisure?arrow_forwardConsider an individual aged 64 who is eligible to collect full social security (public pension) benefits of $6,000 for a year. They have no other income but can work at a weekly wage rate of $600 for a maximum of 52 weeks. Receipt of benefits from the social security program is retirement tested. Specifically, the individual can earn up to $9,000 in annual wage income without a reduction in benefits; however, after $9,000 of earnings, benefits are reduced by 50% for every dollar earned, until the benefits are exhausted. a) Carefully draw and label the budget constraint for this individual. b) Suppose previously there was a retirement test, and then the test is eliminated, i.e., the individual now is allowed to keep all benefits, irrespective of their labour earnings. How would this affect the individual’s labour supply? Question Two David is a 70-year-old accountant. After serving his accounting firm for 45 years, David decides to retire soon. David has great passion for vintage cars…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning